Super fund members risk losing life insurance cover
From July 1 2019, certain super fund members' default life insurance will be cancelled if their superannuation accounts are inactive. Life cover will be stopped on super accounts that have not received a contribution for at least 16 months.
Anyone in this boat who wishes to keep their life insurance cover should act quickly by either reactivating the account, or electing to "opt-in" and retain their insurance.
The new rules are part of the federal government's "Protecting Your Super" reforms. These changes are designed to protect those without any dependents or financial responsibilities, who have life insurance premiums eating away at their account balances for a policy they don’t actually need.
Most people have life and total and permanent disability cover through workplace super fund policies, and don’t realise it.
Super funds have already taken steps to warn affected members by post and email. It’s recommended you carefully check any correspondence from your super fund to confirm if you need to take action, and make a deliberate decision on whether or not you need the life insurance cover.
While continuing life insurance cover is worthwhile for some, The Australian Securities and Investments Commission (ASIC) wants to prevent super funds from encouraging affected members to retain life insurance cover when it is possibly not required. ASIC warned that super funds should be “balanced and factual” when contacting affected members.
Additionally, under this "Protecting Your Super" reform, super fund accounts that have been inactive for 16+ months and have a
balance of less than $6,000 will be paid to the ATO, which will consolidate the funds with the members' active super account.
If you have questions or concerns regarding your super fund or life insurance cover, we recommend you contact a trusted advisor such as your insurance broker or tax agent.
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